Onus v Registrar of Aboriginal and Torres Strait Islander Corporations
[2017] FCA 1498
•12 December 2017
FEDERAL COURT OF AUSTRALIA
Onus v Registrar of Aboriginal and Torres Strait Islander Corporations [2017] FCA 1498
File number: VID 1133 of 2017 Judge: O'CALLAGHAN J Date of judgment: 12 December 2017 Catchwords: CORPORATIONS – where show cause notice issued while relevant corporation was still in special administration – whether notice issued in such circumstances a valid and effective notice for the purposes of s 487-10(1) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) – if notice valid, whether the period provided for response by the relevant corporation a reasonable period within the meaning of s 487-10(1)(a) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) Legislation: Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth), ss 487-1, 487-10(1)-(2), 487-15, 487-20, 490-1, 490-5, 496-1, 496-5, 496-10, 499-1, 499-5, 505-1, 505-10, 508-1, 521-1 Cases cited: Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (2011) 195 FCR 318
Onus v Registrar of Aboriginal and Torres Strait Islander Corporations [2017] FCA 798
Wattmaster Alco Pty Ltd v Button (1986) 13 FCR 253
O’Donovan J, Company Receivers and Managers (Law Book Company, looseleaf)
Date of hearing: 28 November 2017 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 64 Counsel for the Applicants: Mr D M Ryan QC and Mr T Greenway Solicitor for the Applicants: Shayne Daley & Associates Counsel for the First Respondent: Ms K Foley Solicitor for the First Respondent: Australian Government Solicitor Counsel for the Second Respondent: Ms K Brazenor Solicitor for the Second Respondent: McCullough Robertson ORDERS
VID 1133 of 2017 BETWEEN: SANDRA ONUS
First Applicant
CHRISTINE COOKTOWN
Second Applicant
AND: REGISTRAR OF ABORIGINAL AND TORRES STRAIT ISLANDER CORPORATIONS
First Respondent
PAUL CASE
Second Respondent
JUDGE:
O'CALLAGHAN J
DATE OF ORDER:
12 DECEMBER 2017
THE COURT ORDERS THAT:
1.The separate questions be answered as follows:
(a)The first question:
(i)Whether the show cause notice issued by the first respondent on 7 August 2017 (“the second show cause notice”) while Gunditj-Mirring Traditional Owners Aboriginal Corporation RNTBC (“the corporation”) was still in special administration was a valid and effective notice for the purposes of s 487-10(1) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (“the CATSI Act”).
(ii)Answer: No.
(b)The second question:
(i) If yes to (a), whether, in the circumstances, the period specified in the second show cause notice within which the corporation was invited to respond to it was a reasonable period within the meaning of s 487-10(1)(a) of the CATSI Act.
(ii)Answer: Unnecessary to answer.
2.The applicants file any written submissions on which they wish to rely about the form of any consequential orders that should be made, including on the question of costs by 4.30 pm on 13 December 2017.
3.The respondents file any written submissions on which they intend to rely in reply by 4.30 pm on 15 December 2017.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
O’CALLAGHAN J:
INTRODUCTION
The applicants, who are two of three former directors of the corporation (the applicants), seek judicial review under s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the ADJR Act) of a decision made on 13 September 2017 by a delegate of the first respondent (the registrar), pursuant to s 487–1 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (the CATSI Act), to place the Gunditj Mirring Traditional Owners Aboriginal Corporation RNTBC (the corporation) in special administration and to appoint the second respondent (the special administrator) as special administrator of the corporation for a period ending on 15 January 2018 (the decision).
The decision is contained in a “Notice of Determination and Appointment” from the registrar dated 13 September 2017. It states as follows:
WHEREAS:
A.A show cause notice under section 487-10 of the CATSI Act was served on the corporation on the Gunditj Mirring Traditional Owners Aboriginal Corporation RNTBC (ICV 4672) (the corporation) on 7 August 2017.
B.An addendum to the show cause notice under section 487-10 of the CATSI Act was served on the corporation on 31 August 2017.
C.Having considered the representations made by the corporation, as a delegate of the Registrar of Aboriginal and Torres Strait Islander Corporations, I am satisfied that one or more grounds specified in section 487-5 of the CATSI Act have been established.
AND TAKE NOTICE THAT
1.Under section 487-1 of the CATSI Act, I have determined that the corporation is to be under special administration from 12.01 am (AEST) on 14 September 2017 until 11.59pm (AEST) on 15 January 2018 (the period of the special administration).
2.Under section 490-1 of the CATSI Act, I have appointed Mr Paul Case as the special administrator for the period of the special administration.
This is the second application made by the applicants in respect of a decision by the registrar to place the corporation in special administration.
The first decision purportedly to place the corporation in special administration with effect from 13 June 2017 until 15 December 2017 was set aside with effect from 25 August 2017: see Onus v Registrar of Aboriginal and Torres Strait Islander Corporations [2017] FCA 798. The effect of that order was that, until 25 August 2017, the special administrator was able lawfully to discharge his functions (including to manage the affairs of the corporation, with all the powers of directors), despite his invalid appointment: see Wattmaster Alco Pty Ltd v Button (1986) 13 FCR 253 at 256 per Sheppard and Wilcox JJ, holding that it is consistent with the scope and purpose of s 16(1) of the ADJR Act that an order nullifying an invalid decision “should nevertheless take effect from some later date”.
The parties in this proceeding agreed that two separate questions be tried, namely:
(1)Whether the show cause notice issued by the first respondent on 7 August 2017 (“the second show cause notice”) while Gunditj-Mirring Traditional Owners Aboriginal Corporation RNTBC (“the corporation”) was still in special administration was a valid and effective notice for the purposes of s 487-10(1) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (“the CATSI Act”)?
(2)If yes to (a), whether, in the circumstances, the period specified in the second show cause notice within which the corporation was invited to respond to it was a reasonable period within the meaning of s 487-10(1)(a) of the CATSI Act?
I described briefly the history and functions of the corporation in Onus v Registrar of Aboriginal and Torres Strait Islander Corporations [2017] FCA 798. The corporation was registered in 2006 and has over 450 members from 14 family clan groups. Following a consent determination of this Court in 2007, recognising the Gunditjmara people’s native title rights over close to 140,000 hectares of land in southwest Victoria and extending into South Australia, the corporation was appointed as the registered native title body corporate for the Gunditjmara people. The corporation is also a registered aboriginal party under the Aboriginal Heritage Act 2006 (Vic), with statutory responsibility for the management of the cultural heritage and objects of the Gunditjmara people.
Until July 2017 the applicants were two of the three directors of the corporation. Their terms expired and they were not re-appointed, because no Annual General Meeting was held in accordance with the relevant rules, which was the only procedure available to provide for their possible re-appointment.
The applicants submit that if either of the separate questions is answered no, then the Court should make consequential orders that the decision of the registrar to place the corporation in special administration should be set aside, with effect from 15 January 2018, which is the date that his appointment is currently set to expire in any event.
Given that the special administrator’s term is due to expire on 15 January 2018, and that the applicants agree that, in the event that the Court finds that the decision to appoint the special administrator was invalid, he may and should nonetheless remain in office until that date in any event, the utility in the Court answering the two separate questions is not immediately apparent, at least to me. But the applicants and the registrar urged me to do so, so I proceed accordingly. (The special administrator filed a submitting appearance.)
THE CATSI ACT
The first question involves consideration of a number of provisions of Ch 11 of the CATSI Act, which is headed “External Administration”.
One of the ways in which the management of some or all of the affairs of an Aboriginal and Torres Strait Islander corporation may be assumed by someone other than the directors of the corporation is by the appointment of a special administrator: see Pt 11-2 – Special Administration.
Division 487 is headed “Special administration of Aboriginal and Torres Strait Islander corporation”.
Section 487-1 provides:
487-1Registrar may put Aboriginal and Torres Strait Islander corporation under special administration
(1)The Registrar may determine, in writing, that an Aboriginal and Torres Strait Islander corporation is to be under special administration for the period specified in the determination.
(2)A determination under subsection (1) is not a legislative instrument.
(3)The Registrar:
(a) must not make a determination under subsection (1) if:
(i) the corporation is being wound up; or
(ii) a liquidator of the corporation has been appointed; and
(b)may make a determination under subsection (1) even if the corporation is being administered under Part 5.3A of the Corporations Act (as applied by section 521-1 of this Act).
(4)The Registrar may make a determination under subsection (1) only if the Registrar is satisfied that at least one of the grounds set out in section 487-5 is satisfied.
(5)The Registrar must make a determination under subsection (1) in accordance with section 487-10.
Section 487-5(1) sets out the grounds for special administration, as follows:
487-5Grounds for special administration
(1)The following are the grounds for determining that an Aboriginal and Torres Strait Islander corporation is to be under special administration:
(a)the corporation has traded at a loss for at least 6 months during the period of 12 months before the determination is made;
(b)the corporation or the officers of the corporation have failed to comply with, or to ensure that the corporation complies with, one or more of the following:
(i) a provision of this Act;
(ii) an internal governance rule of the corporation;
(iii) a notice that the Registrar has given the directors under section 439-20;
and the corporation has, or the officers have, failed to give the Registrar a satisfactory explanation for the failure;
(c)the corporation has failed to comply with an obligation under Part 7-3;
(d)the officers of the corporation have acted in the affairs of the corporation:
(i) in their own interests rather than in the interests of the members of the corporation as a whole; or
(ii) in a way that appears to be unfair or unjust to members of the corporation;
(e)the affairs of the corporation are being conducted in a way that is:
(i) oppressive; or
(ii) unfairly prejudicial to, or unfairly discriminatory against, a member or members of the corporation; or
(iii) contrary to the interests of the members of the corporation as a whole;
(f)disputes between:
(i) the corporation’s members; or
(ii) the corporation’s members and the corporation’s officers;
are interfering with the proper conduct of the corporation’s affairs;
(g)disputes between the corporation’s officers are interfering with the proper conduct of the corporation’s affairs;
(h)a majority of the corporation’s directors have requested the Registrar in writing to appoint a special administrator;
(i)at least the required number of members under subsection (4) request the Registrar, in writing, to appoint a special administrator;
(j)the appointment of the special administrator is otherwise required:
(i) in the interests of the members of the corporation; or
(ii) in the interest of the corporation’s creditors; or
(iii) in the public interest.
Paragraph (j) does not limit any of the other paragraphs in this subsection.
…
The show cause notice procedure is relevantly set out in s 487-10(1) and (2):
487-10Show cause notice procedure
(1)Subject to subsection (2), the Registrar must, before determining that an Aboriginal and Torres Strait Islander corporation is to be under special administration:
(a)give the corporation notice in writing inviting the corporation to show cause, within a reasonable period specified in the notice, why the determination should not be made; and
(b)consider any representations the corporation makes to the Registrar within that period.
(2)Subsection (1) does not apply if the Registrar is satisfied that the determination needs to be made as a matter of urgency to prevent:
(a)a likely loss of property of the corporation; or
(b)a likely loss of public money held or administered by the corporation; or
(c)conduct that would contravene:
(i) a provision of this Act or the regulations; or
(ii) a law of the Commonwealth or a State or Territory; or
(d)the corporation ceasing to provide, or suspending the provision of, services that are essential to, or very significant for, a particular community or group.
…
An extension of time is provided for in s 487-15:
487-15Extension of period of special administration
(1)The Registrar may extend the period for which an Aboriginal and Torres Strait Islander corporation is to be under special administration.
(2)An extension under subsection (1) must:
(a)be made in writing; and
(b)be made before the period to be extended ends.
And an appointment may be terminated under s 487-20:
487-20Registrar may terminate special administration
(1)The Registrar may determine in writing that an Aboriginal and Torres Strait Islander corporation is to cease to be under special administration on the date specified in the determination.
(2)A determination under subsection (1) is not a legislative instrument.
(3)Without limiting subsection (1), the Registrar may determine that the corporation is to cease to be under special administration if the Registrar is satisfied that it is no longer necessary for the corporation to be under special administration.
Division 490 is headed “Appointment of special administrator”. Section 490-1 provides:
490-1Registrar may appoint special administrator
(1)The Registrar may appoint a special administrator for an Aboriginal and Torres Strait Islander corporation that is under special administration.
Note:The special administrator may be appointed either as the initial special administrator for the special administration of the corporation or to replace a special administrator who was appointed earlier.
(2)The appointment must be made in writing.
Section 490-5 deals with the period of appointment:
490-5Period of appointment
(1)The appointment must specify the period for which the special administrator is appointed.
(2)The Registrar may extend the period for which a special administrator is appointed.
(3)An extension under subsection (2) must:
(a) be made in writing; and
(b) be made before the period to be extended ends.
(4)An appointment:
(a)has effect, subject to paragraph (b), until the end of the period of the appointment; and
(b)ceases to have effect if it is terminated under section 505-1 before the end of that period.
Division 496 is headed “Effect of appointment of special administrator on officers of the corporation”.
Section 496-1 provides:
496-1General rule that offices of directors and secretary vacated when special administrator appointed
(1)Subject to section 496-5, the following offices become vacant on the appointment of a special administrator for an Aboriginal and Torres Strait Islander corporation:
(a) the office of each director of the corporation;
(b) the office of each secretary (if any) of the corporation.
(2)Subsection (1) applies even if the special administrator is appointed to replace another special administrator for the corporation.
Note:This subsection has the effect that if a special administrator is appointed and the Registrar determines, as part of that appointment, that the offices of the corporation’s officers are not to be vacated, the subsequent appointment of a replacement special administrator will automatically vacate those offices unless a fresh determination is made under section 496 5 in relation to the new appointment.
Section 496-5 provides:
496-5Registrar may determine that offices not vacated in certain circumstances
(1)The Registrar:
(a) may determine that the offices of the corporation’s directors are not vacated on the appointment of a special administrator; and
(b) may determine that the office of the corporation’s secretary is not vacated, or the offices of each of the corporation’s secretaries are not vacated, on the appointment of the special administrator.
(2)A determination under subsection (1) is not a legislative instrument.
(3)The Registrar may make a determination under subsection (1) only if the Registrar is satisfied that making the determination is in the best interests of the corporation.
(4)A determination under subsection (1) must be included in the special administrator’s appointment.
Section 496-10 relevantly provides:
496-10Powers of officers can only be exercised by, or with the consent of, special administrator
(1)While an Aboriginal and Torres Strait Islander corporation is under special administration, a person (other than the special administrator) cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the corporation.
Penalty: 25 penalty units or imprisonment for 6 months, or both.
(2)Subsection (1) does not apply to the extent to which the performance or exercise, or purported performance or exercise, is with the special administrator’s written approval.
…
(3)An offence against subsection (1) is an offence of strict liability.
…
(4)Subsection (1) does not remove an officer of an Aboriginal and Torres Strait Islander corporation from his or her office.
Division 499 is headed “Functions, duties and powers of special administrator”. Section 499-1 provides that the special administrator “is responsible for the conduct of the affairs of the corporation”. Section 499-5 sets out the powers of a special administrator as follows:
499-5Powers of special administrator
(1)While an Aboriginal and Torres Strait Islander corporation is under special administration, the special administrator:
(a)has control of the corporation’s business, property and affairs; and
(b)may carry on that business and manage that property and those affairs; and
(c)may terminate or dispose of all or part of that business, and may dispose of any of that property; and
(d)may engage or discharge employees on behalf of the corporation; and
(e)may perform any function, and exercise any power, that:
(i) the corporation; or
(ii) any of the corporation’s officers; or
(iii) the corporation’s members;
could perform or exercise if the corporation were not under special administration.
…
(2)To avoid doubt and without limiting paragraph (1)(e), the special administrator may perform any function and exercise any power that the corporation has as trustee.
(3)Without limiting subsection (1), the special administrator may do the following:
(a)change the corporation’s constitution;
(b)admit a person as a member of the corporation;
(c)remove a person as a member of the corporation;
(d)appoint a person as a director or secretary of the corporation;
(e)terminate a person’s appointment as a director or secretary of the corporation;
(f)terminate a person’s appointment as contact person for the corporation.
(4)In changing the corporation’s constitution, the special administrator does not have to comply with paragraph 69-5(1)(a) (special resolution), section 69-15 (satisfying extra requirements in constitution) or section 69-20 (corporation to lodge copy of changes).
…
Division 505 is headed “Termination of special administrator’s appointment”. Section 505-1 provides:
505-1Termination of appointment of special administrator
(1)The appointment of a special administrator for an Aboriginal and Torres Strait Islander corporation terminates if:
(a)the period for which the special administrator is appointed ends; or
(b)the special administrator dies; or
(c)a liquidator for the corporation is appointed; or
(d)the corporation is being wound up; or
(e)the special administrator resigns the appointment by notice in writing to the Registrar; or
(f)the Registrar terminates the special administrator’s appointment under subsection (4); or
(g)the Registrar terminates the special administration under section 487-20.
…
(2)Subject to subsection (3), the special administrator’s resignation under paragraph (1)(e) takes effect at the end of the period of 28 days after the day on which the special administrator gives the notice to the Registrar.
(3)The Registrar may, on application by the special administrator, determine in writing that the special administrator’s resignation is to take effect before the end of the period of 28 days referred to in subsection (2).
(4)The Registrar may, by notice in writing to the special administrator for an Aboriginal and Torres Strait Islander corporation, terminate the special administrator’s appointment if satisfied that it is appropriate to do so.
Section 505-10 provides:
505-10Registrar to appoint new special administrator in certain circumstances
(1)If the appointment of a special administrator for an Aboriginal and Torres Strait Islander corporation terminates, the Registrar must, as soon as practicable after the termination of the appointment, appoint another person as special administrator for the corporation.
(2)Subsection (1) does not apply if the Registrar is satisfied that it is no longer necessary for the corporation to be under special administration.
Division 508 is headed “Transition to normal control of the corporation’s affairs at end of special administration”. Section 508-1 provides:
508-1Special administrator to ensure that there will be directors when corporation ceases to be under special administration
(1)The special administrator for an Aboriginal and Torres Strait Islander corporation must ensure that, immediately after the special administration of the corporation ends, there will be:
(a)directors of the corporation who can assume control of the corporation’s affairs; and
(b)a secretary for the corporation if it is registered as a large corporation; and
(c)a contact person for the corporation if it is registered as a small or medium corporation.
Note:There are a number of different ways in which there can be directors who can assume control of the corporation’s affairs when the special administration ends. For example:
(a) the offices of the directors may not have been vacated when the special administrator was appointed and some or all of those directors may remain in office at the end of the special administration; or
(b) the special administrator may have exercised his or her power to appoint directors under subsection 499-5(3) and some or all of the appointees may remain in office at the end of the special administration; or
(c) persons may, at a general meeting of the members of the corporation called by the special administrator under section 508-5, have been elected as directors to assume control of the corporation’s affairs when the special administration ends.
…
CONSIDERATION
The first question
The first question arises because the first appointment of the special administrator was invalid. If he had been validly appointed, and his work was not yet done, then the term of the appointment could readily have been extended: see s 487-15 of the CATSI Act. The power of extension is not available here because, as the registrar implicitly accepted, an invalid term cannot validly be extended.
The applicants’ case is that it is “absurd” to construe the relevant provisions of the CATSI Act set out above to permit the registrar to ask any corporation by way of a show cause notice whether a special administrator should be appointed to it when a special administrator has already been appointed and his term is unexpired.
The parties were not required to, and did not, file written submissions. What follows is the substance of the oral submissions by counsel for the applicants, Mr D M Ryan QC, in relation to the first question:
So the first special administration as a result of your Honour’s order still had a bit over two weeks to run at that stage. Nevertheless, the second show cause notice was issued and invited the corporation to show cause by the close of business on 22 August 2017 why a delegate of the registrar should not determine that the corporation is to be under special administration.
Now, of course, the situation was that the corporation was then under special administration. And we say that as a matter of construction of the Act, it is simply not open to the registrar to issue a show cause notice to a corporation that is already under special administration as a result of the service of an earlier show cause notice. Whether it will ultimately be determined that that show cause notice was invalid or not is not to the point. The point is – put it another way, the first appointment was not void. It was, as events have known, voidable. But it was not voided until 25 August.
So it’s our submission that the – it simply wasn’t open, as a matter of power or discretion to the registrar to serve on the corporation a second show cause notice. And there was a real practical concern – there’s a real practical consideration which reinforces that construction, if reinforcement be necessary, because the second show cause notice was served on the directors of the corporation. Now, your Honour will recall it seems to be common ground that at the time of the service, all – none of the three directors had any powers which were exercisable under the rules or under the Act. And it was served on a Mr Dennis Rose who had, apparently, been appointed as the contact person for the corporation, appointed by the special administrator, Mr Case. And it was also served on the second – on the special administrator himself.
Counsel’s submission also finds some support in the words of the show cause provision. Section 487-10 requires the registrar “before determining that … [a corporation] is to be under special administration … to give the corporation notice in writing inviting the corporation to show cause…etc.” (emphasis added). The giving of the notice thus proceeds on the necessary assumption that the registrar has not yet determined to appoint a special administrator.
Counsel for the registrar, Ms K Foley, submitted that, in the absence of an express prohibition against the serving of another show cause notice during the currency of a period of special administration, it should be permitted. She also submitted that the fact that the registrar may make a determination under s 487-1(1) even if the corporation is being administered under Pt 5.3A of the Corporations Act 2001 (Cth), as applied by s 521-1 of the CATSI Act (see s 487-1(5)), indicates that the CATSI Act “does contemplate the giving of a show cause notice where a corporation is under some kind of external administration”.
Ms Foley also submitted that a show cause notice “regardless of whether there is a special administration in place or not, still fulfils [the] statutory purpose [of affording procedural fairness]”. It was further submitted that there was no practical difficulty, at least in this case, about the corporation responding to the second show cause notice because the registrar had consented to the three previous directors of the corporation, including the two applicants to this proceeding, responding to it pursuant to the power given to the special administrator under s 496-10(2) (see [23] above).
In my view, and recognising that there is not much in the way of context to provide a resolution to the issue that separates the parties, the submission advanced on behalf of the applicants is on balance to be preferred. As Mr Ryan submitted, the fact that the show cause procedure may still be followed in circumstances where a corporation is in administration, rather points against the contention advanced on behalf of the registrar, because it highlights that, by use of the “very drafting technique” adopted in s 487-1(3)(b), the draftsperson could have, if they had wanted to, provided for two parallel CATSI Act special administrators.
The registrar’s other submissions – that the second show cause notice still serves its statutory purpose and that the applicants and the other previous director were permitted to respond – do not in my view address the logical difficultly inherent in the registrar’s case.
The practical problem that the construction which I prefer may be said to be capable of producing is that, if a corporation is to be provided with “reasonable notice”, as it must under s 487-10, then in circumstances where:
(1)a special administrator has been invalidly appointed;
(2)but remains in office pursuant to an order of a court only up until a particular date (here, 25 August 2017);
(3)there is further work that must be done that requires a special administrator to serve beyond that date (here, until 15 January 2018);
(4)there are no longer any validly appointed directors,
then a lacuna of governance for at least the period of the reasonable notice occurs if the “new” show cause notice cannot be served until after the expiry on the first term of the special administration.
When the special administration ends, a validly appointed special administrator must ensure that there are directors who can assume control of the corporation immediately. So there is no such lacuna in that situation: see s 508-1, at [27] above. But that “seamless transition” could not occur in this case, because, as the parties must be taken to accept, that power is not available to an invalidly appointed special administrator.
The draftsperson of the CATSI Act clearly foresaw some other instances where a lacuna might happen. Section 505-1, for example, deals with what is to be done when a special administrator resigns. In such circumstances, the special administrator’s resignation under para (e) of s 505-1(1) takes effect at the end of the period of 28 days after the day on which the special administrator gives the notice to the registrar. That period would, in the ordinary case, probably give the registrar sufficient time to find a replacement special administrator.
There are other circumstances where difficulties might arise, most obviously when a special administrator dies: see s 505-1(1)(b). In that circumstance, s 505-10(1) provides that the registrar must, “as soon as practicable” after the termination of the appointment, appoint another person as special administrator for the corporation. That contemplates the possibility that there may be a period where there is no effective governance of a corporation.
In a case of this type, by which I mean a case that has the features described at [36] above, there are two ways in which the registrar may choose to act if faced with the possibility that a corporation is to be without anyone to administer or control it. The first is the provision within the section governing the giving of show cause notices that permits the registrar to appoint a special administrator, without the giving of a show cause notice, in “urgent cases”. The second is the registrar’s power to appoint a receiver.
The urgent case
Section 487-10(2) relevantly states that s 487-10(1) does not apply if the registrar is satisfied that the determination to appoint a special administrator “needs to be made as a matter of urgency” to prevent a likely loss of property of the corporation or of public money held or administered by the corporation; or to prevent conduct that would contravene: (i) a provision of the CATSI Act or regulations made under that Act; or (ii) a law of the Commonwealth or a State or Territory; or to prevent the corporation ceasing to provide, or suspending the provision of, services that are essential to, or very significant for, a particular community or group.
In a case such as this, the question of whether any of those identified circumstances (the possible loss of property, money, breaches of law or failure to provide significant services and so on) would properly be regarded as “urgent” would fall to be assessed, among other things, by reference to the fact that the corporation would be likely to be without anyone in a position to control the affairs of the corporation.
In Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (2011) 195 FCR 318 at [91] the Full Court (Keane CJ, Lander and Foster JJ) observed, by way of obiter, as follows:
The primary judge is said to have erred in finding that a concern as to the possibility of ongoing imprudence in the expenditure of funds held by the appellant was relevant to the fixing by the second respondent of the time specified in the show cause notice. It is argued that if that was really the respondents’ concern, a determination would have been made under s 487-10(2) without the need for notice under s 487-10(1). It hardly lies in the appellant’s mouth to say that the respondents are to be faulted for not taking more draconian action against the appellant. No doubt s 487-10(2) is intended for cases of serious emergency. It was open to the second respondent to regard this case as not one of serious emergency but as one where a prompt response was necessary.
(Emphasis added.)
In my view, and with great respect, I would not regard the circumstances set out in s 487-10(2) as being limited to “cases of serious emergency”. Rather, the test posed is whether one or more of the identified circumstances (see [41] above) is or are “urgent”. If it, or they, are then that is a sufficient basis to invoke the power to appoint a special administrator without first issuing a show cause notice. In my respectful view, s 487-10(2) does not also impose an obligation on the registrar to show that the case is one involving “serious emergency”, because such words of additional qualification are not contained in the section.
The power to appoint a receiver
Section 516-1 of the CATSI Act provides that the Corporations Act 2001 (Cth) receiver provisions apply to an Aboriginal and Torres Strait Islander corporation. Section 516-1(3) defines those provisions to include Pt 5.2 of the Corporations Act 2001 (Cth), which concerns receivers and other controllers of corporations.
This Court has the power to appoint a receiver under s 57 of the Federal Court of Australia Act 1976 (Cth), if it appears to be just and convenient to do so. The remedy is one “of great utility with a long pedigree”: see O’Donovan J, Company Receivers and Managers (Law Book Company, looseleaf) at [19.110], footnote 1, and the cases there cited.
If any corporation, including an Aboriginal and Torres Strait Islander corporation, were to face the prospect of being “ungoverned”, a court would not hesitate to appoint a receiver to prevent that from happening.
Properly construed, therefore, the conclusion that I favour about the proper operation or construction of the show cause notice provision, in a case such as this, is unlikely to result in the inconvenience or potential “chaos”, to adopt the word used by counsel for the registrar, of a period where there is no one to control the corporation’s business, property or affairs.
For those reasons, question 1 is to be answered “no”.
The second question
Although the second question only arises if the first is answered “yes”, I will deal with the submissions on the second question in the event that I am wrong about the first question.
The parties did not dispute the guiding principles in relation to this question, namely:
A consideration of the following matters was required in order to determine what was a ‘reasonable period’ for the purposes of s 487-10(1)(a) … the number of issues raised in the show cause notice; the factual complexity of each of those issues; the need to assemble factual material if any ‘representations’ are to be meaningful; the need for prompt action to be taken; and the need or desirability of obtaining independent legal or other advice.
(See Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (2011) 195 FCR 318 at [86].)
My task in evaluating this question is not an easy one because of the paucity of evidence about it. Other than the terms of the show cause notice itself and an affidavit of the first applicant sworn on 10 November 2017 (which barely touches on the question), I have very little by way of evidence to assess the question of reasonable notice.
In my view, and doing the best that I can on the basis of what is before me, the applicants have not demonstrated that the time within which the corporation was required to respond to the show cause notice was unreasonable, for the reasons submitted by counsel for the registrar.
First, matters that are the subject of the second show cause notice substantially overlap with the matters the subject of the first show cause notice. That in turn means that the corporation, the applicants and their advisers already had a significant degree of familiarity with the subject matter of the second notice.
Secondly, although a number of the matters in the second show cause notice were relatively minor, many of them raised serious matters which warranted the registrar reasonably forming the view that intervention should promptly occur, absent good cause being shown to the contrary. I will not recite the matters contained in the show cause notice here. The particular matters of seriousness relied upon by the registrar are to be found at pages 20, 21, 22 and 28 of Exhibit LSO-1, which is the second show cause notice. The registrar also referred to the evidence about the losses incurred by the corporation for the financial years ended 2015, 2016 and 2017. In those circumstances, I am inclined to agree with the submission made on behalf of the registrar that it was open to him, “having regard to those matters, to decide that although they didn’t give rise to the level of urgency that obviated the need for a show cause process at all, it did require a prompt response”.
Thirdly, the registrar relies on the fact that the response that was in fact provided, albeit under protest, demonstrated that “it is not obvious that the 15 days prejudice the ability to prepare the thorough response in light of the response that was given”. In that regard, the registrar referred to sections 2.1.2, 2.1.4, 2.1.6, 2.1.8, 2.1.9, 2.1.10 and 2.1.12 of the second show cause notice, each of which contains what may fairly be described as a detailed response to the various questions asked.
Fourthly, the registrar also relied on the fact that many of the answers given were in an identical form, that is to say either that the factual allegations related to an earlier period in time when the applicants were not directors or that whatever occurred was the responsibility of the former Chief Executive Officer. In that regard, the registrar referred to sections 2.1.1, 2.1.2, 2.1.5, 2.1.9, 2.1.10 and 2.3.3 of the second show cause notice. As counsel for the registrar submitted: “[i]n light of that response, which is reiterated through the document, it is hard to see how more time would have changed anything that the applicants might have said about that”.
Fifthly, the registrar also relies on the fact that, having provided to the applicants what it called an “addendum” to the second show cause notice, which dealt with additional matters that had come to light subsequent to the issuing of the second show cause notice, and which provided further information which had been requested by the applicants and extended the time for a response by a further 11 days, the question of the assessment of the reasonableness of the notice provided should be viewed in light of these matters.
Sixthly, it was common ground that the applicants, although they were not directors at the time the second show cause notice was served, were told by the special administrator that they could respond to it, and they were given access to the books and records of the corporation.
The applicants contended that there is no power in the CATSI Act to issue a so-called “addendum”. They submitted that if further matters are sought to be raised, the initial show cause notice should be withdrawn, a new one issued, and the process started again. It is not necessary, given the other factors to which I have referred, to decide the question of whether power exists to proffer such an addendum. In my opinion, whether the power exists or not, the fact that an 11-day extension was granted to meet outstanding requests both in the second show cause notice and the addendum is evidence that may be used to assess the question of reasonable notice.
For those reasons, in all the circumstances, I am not persuaded that the period of notice, which amounted to 26 days, was unreasonable.
Because the need for an answer to question 2 was predicated on question 1 being answered “yes”, question 2 will accordingly be answered “Unnecessary to answer”.
CONCLUSION
For those reasons, question 1 will be answered “no”. Question 2 will be answered “Unnecessary to answer”.
I will hear the parties on the form of any consequential orders that should be made, including on the question of costs.
I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O’Callaghan. Associate:
Dated: 12 December 2017
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